Page 15 - RusRPTOct21

It is still unclear whether companies would be able to pass through the cost into the electricity price. If the rules allow for the inclusion of CO2 costs in market prices, it might raise the country's electricity prices by 15% (Sakhalin price) to 36% (EU ETS price).
Steel companies are the second-most exposed sector, with 7-20% of their EBITDA exposed in such an adverse scenario.
Oil and gas names are third, with 3-10% of EBITDA at risk.
2.6 Russian Ministry of Finance equates decarbonisation of the world’s economy to a “budget disaster”
Russia’s Ministry of Finance published the "Guidelines for Fiscal, Tax and Customs Tariff Policy for 2022 and for the Planning Period of 2023 and 2024" with an unexpectedly large section on energy transition and decarbonisation.
The main conclusion is that "if the announced intentions of a number of countries to achieve carbon neutrality by 2050 (in China -y 2060) acquire legislative status, and other countries follow this example, then the demand for oil will drop dramatically.”
The ministry considers the transport sector toe the main driver of oil demand, and it is in this sector that the biggest changes are taking place. If heavy vehicles, ships and aviation continue to depend on fossil fuels, light and commercial electric vehicles will displace cars from the market by 2050. “The growth of the fleet (of cars with internal combustion engines) will stopy 2030 near the 1.3bn mark, after which it willegin to decline simultaneously with a sharp increase in the fleet of electric vehicles,” the forecast says.
The energy transition in the energy sector, combined with quotas on greenhouse gas emissions, carbon certificates and cross-border regulation (more about it here) will inevitably reduce the demand for hydrocarbons. “According to estimates by a number of analytical agencies, oil demand in 2050 in scenarios of zero net greenhouse gas emissions will amount to 17-24% of demand in 2019,” the document says.
Given these conditions, the price of oil will be determined by the cost of its production, "as a result of which oil prices will fall to $35 per barrel in 2030 and slowly decline to $25 in 2050 (in 2020 prices)," the ministry quoted the IEA report. This does not exclude high peaks and a local shortage of oil supply: the industry is threatened with underfunding due to the refusal of the leading investment funds to invest in fossil energy resources.
The mid-term forecast in the "Main Directions ..." is nevertheless quite common: oil at $66 in 2021 and at $55 in 2024, the ruble exchange rate in the range of 72-74 rubles per dollar, GDP growth by 3% per year along a national development goals ”. However, decarbonisation has crept into it too: in the case of an accelerated energy transition, "there is a high probability of the
15 RUSSIA Country Report October 2021 www.intellinews.com